This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

OvaScience Debacle Proves SEC Risk Statements Matter

CAMBRIDGE, Mass. ( TheStreet) -- The crushing of OvaScience (OVAS) shares Wednesday -- the stock is down 30% to $10 -- offers a very important lesson for all biotech and drug investors: Companies include risk statements in their SEC filings for good reason. These warnings are not just boilerplate language. Ignore them at your own peril.

OvaScience believes its infertility therapy Augment is a cellular and tissue-based product, and as such, could be marketed commercially without FDA oversight or review as drug.

Did OvaScience bother to ask FDA if it agreed with the company's decision to market Augment as a cellular and tissue-based product, also known as a 361 HCT/P?

No!

Here's OvaScience's SEC risk statement related to the regulatory strategy behind Augment:

Our current business plan assumes that the FDA will regulate AUGMENT as a 361 HCT/P rather than as a new drug or biologic and, therefore, AUGMENT will not be subject to premarket review and approval. If the FDA disagrees with our interpretation of the applicable regulations, disagrees with our characterization of the AUGMENT procedure or changes its position with respect to such rules and regulations, we may not be able to commercialize AUGMENT on the timeline or with the resources we expect, if at all. We could also be forced to halt human studies, remove the product from the market or be subject to substantial fines or other civil or criminal sanctions.

Guess what happened Tuesday night? FDA sent a letter to OvaScience disagreeing with the company's assertion that Augment is a 361 HCT/P. The agency advised the company to submit a Investigational New Drug (IND) application for Augment.

In other words, FDA considers Augment to be a drug that requires formal regulatory review and approval. Unless OvaScience can change the agency's thinking, the company is in for a long delay before Augment reaches the market. Already, the company has been forced to suspend enrollment in a U.S. study of Augment which the company hoped to use for marketing purposes.

Don't ignore the risk statements companies make in their SEC filings. They often come true, with painful consequences.

-- Reported by Adam Feuerstein in Boston.

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
OVAS $48.30 -3.00%
AAPL $124.26 0.71%
FB $83.03 0.13%
GOOG $555.30 -0.62%
TSLA $190.41 -2.00%

Markets

DOW 17,678.23 -40.31 -0.23%
S&P 500 2,058.77 -2.28 -0.11%
NASDAQ 4,868.2270 -8.2920 -0.17%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs